Extraordinary CEZ Dividend Proposals Gains Traction

The likelihood is rising that Czech power company CEZ will pay an extra dividend, or larger-than-expected dividend, on record-high 2009 net profit of 51.55 billion koruna ($2.74 billion).

The policy of the company, of which 70% is held by the state, is to pay between 50% and 60% of its net profit as dividend, but it’s increasingly likely that later this year CEZ will either raise the payout or make an additional, extraordinary dividend.

The reason for a richer return to shareholders is mounting political pressure for CEZ to grease the wheels of Czech politics. There are parliamentary elections scheduled for May 28-29 and the two leading parties are looking for a way to shower the electorate with cash.

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Just this week, the country’s right-leaning Civic Democrat party, or ODS, announced that, if elected, it would slash value added taxes for small businesses and use a special dividend from CEZ to make up the budget shortfall.

This is the first time the ODS, which is embroiled in an internal power struggle, has said it wants to use CEZ dividends for an additional use besides the dividend financing the state’s road and highway infrastructure fund. There is a caveat to their plan, however, as the VAT change would require approval from Brussels.

Calls for a lush dividend are nothing new, though previously most such calls have come from members of the left-leaning Social Democrat party, or CSSD. The Social Democrats have long said they want a special CEZ dividend to cover increased social spending – read handouts to buy votes.

But now the Social Democrats are gaining in the polls, with the most recent reading of public opinion showing CSSD with a 27.9% voter preference, while ODS garners just about 20%.

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